Every vehicle owner is required to have automobile insurance. It protects the owner of the car in the event of an accident and provides the financial resources to pay the cost of repair or replacement of the car, as well as, the cost to cover damage to other cars or property or injury to victims of the accident.
Automobile insurance also protects the car against theft, fire and vandalism in addition to accidents. Automobile insurance is required before a vehicle can be driven on a public road. There is no law requiring a certain level of insurance be maintained but most states have laws mandating the minimum amount of insurance that is required. Lenders usually require a certain level of insurance be maintained while the vehicle is being financed. Once the financing has been paid in full, the owner can maintain any level of insurance as long as it meets the states required minimum, if it has a required minimum.
The cost of the automobile insurance is based on several things. The age of the car, the age, sex and driving habits and driving history of the driver, as well as the credit rating of the driver, the length of time the driver has been licensed, the location where the car is registered and the potential risk level of the car. When calculating premiums, the insurance company will take into account and apply discounts for the presence of seatbelts and air bags, anti lock brakes, anti theft and alarm components, a clean driving record, multiple insurance policies such as multiple cars or a combination of auto and home owners insurance.
When asked how much automobile insurance a driver should have, the answer most often given is find out what the minimum required insurance is in your state then buy as much automobile insurance beyond that as you can afford. That is both a good and bad answer. There is a point of no return where no matter how much automobile insurance you have, the return will be minimal. That is usually where car replacement costs come in. Because cars decrease in value rapidly, it is possible to be paying more in insurance for car replacement than the car is worth and you will receive in a payout from the insurance company.
Automobile insurance is available through commercial insurance underwriters certified to sell insurance. Most states regulate the insurance rates paid by the insured, but insurance agents are allowed to offer insurance at a lower rate to generate business, as well as be as competitive as possible. The lower rates do not affect the quality, integrity or coverage of the insurance. Before choosing car insurance plan, check around and compare prices of at least three insurance companies and agents. Shopping around will assure the insured of getting the best rate possible.
It is a good idea to re-evaluate your automobile insurance every year or when you renew your insurance to make sure you have just the right coverage to protect you and your car.